Wall Street's embattled credit rating agencies got it badly wrong in failing to foresee the global financial crisis - but nearly everybody else in the business world made the same mistake, the investor Warren Buffett declared today.

Coerced into appearing by a subpoena, America's second-richest man made a reluctant trip to New York to give evidence to the US financial crisis inquiry commission, which is investigating ratings agencies' top-grade ranking of doomed mortgage-backed securities during the run-up to a catastrophic housing market collapse.

Asked about his 13% shareholding in the ratings firm Moody's, the billionaire stockpicker accepted that the credit ratings system had fallen down badly on the job. But he pointed out that it was easy to be wise with hindsight.

"The whole American public was caught up in a belief that American housing couldn't fall dramatically," said Buffett. "Very, very few people could appreciate the bubble. That's the nature of bubbles – they're mass delusions."

The so-called Sage of Omaha insisted to the bipartisan panel that it was unfair to turn Moody's and its rivals, Standard & Poor's and Fitch, into villains: "Rising prices and discredited Cassandras from the past blunt sensitivities and judgment even of people who are very smart."

Joking that he never understood the high price of tulips in the Netherlands and that he failed to anticipate the scale of the dotcom slump a decade ago, Buffett said he, too, was taken by surprise when the global credit crunch began to bite in 2007. "Yeah, I know, I blew it," Buffett told a Republican questioner, Peter Wallison. "I didn't think it would pop like it did."

Credit ratings firms have been attacked for their apparent ineptitude in attaching triple-A scores to mortgage-related bonds and other complex derivatives that turned out to be based on deeply risky capital. The US commission's chairman, Phil Angelides, cited figures suggesting that 83% of mortgage securities given an AAA rating by Moody's in 2006 were subsequently downgraded, while 89% of home loan packages granted an investment-grade rating in 2007 were later reduced to junk status. "The miss was huge," said Angelides. "It was 90% downgrades. Even the dumbest kid in class gets 10% in an exam."Moody's chief executive, Ray McDaniel, apologised for his firm's conduct, admitting it had been "deeply disappointing". McDaniel said: "Moody's is certainly not satisfied with the performance of those ratings." Indeed, over the past few years, there has been an intense level of self-evaluation within our organisation."

Several credit rating reform proposals are under consideration, including exposing the "big three" to new competitors. One Congressional proposal, tabled by Democratic senator Al Franken, would introduce a system randomly allocating a ratings agency to each security issued on Wall Street to avoid banks "shopping around" for sympathetic treatment.